WHYY ends fiscal '09 with a deficit

Public broadcaster WHYY ended its last fiscal year with a deficit of $3.9 million, an unexpectedly big swing from the previous year's $1.6 million surplus, according to its latest tax filing.

The deficit follows four years of surpluses and was accompanied by a rise in WHYY's payroll costs, according to the station's latest 990 tax form, covering the year ended June 30, 2009.

The compensation of chief executive officer and president William J. Marrazzo, which two years earlier generated controversy as the top pay nationwide for a local public broadcasting CEO, dropped for the second straight year, to $506,157 from $528,800.

In the reported fiscal year, the station's revenue decreased to $25.7 million from $30.6 million the previous year.

Asked about the overall results, WHYY board chairman Jerry Sweeney said the organization's leadership had anticipated a "challenging economic environment," adding, "The environment got much more challenging."

Marrazzo, in a statement, said it was a difficult time for an organization that relies on contributions, and "even more so for one such as WHYY, which also faced the tough prospects of loss of corporate support during the recession" and a federal requirement to switch to digital television broadcasting.

According to Sweeney, Marrazzo waived a 3 percent salary increase he was scheduled to receive, agreed to a 2 percent pay cut, and gave up a performance bonus. Marrazzo's voluntary reductions saved WHYY $200,000 in the fiscal year, station spokesman Art Ellis said. In that year, Marrazzo made one donation to WHYY of at least $25,000, and another to the station's $50 million multiyear campaign of at least $50,000, Ellis said.

The station, which operates 91FM and WHYY TV12, earned $12.8 million from membership dues during the reporting period, including bequests, down from $13.1 million the prior year, tax documents show.

Contributions from other sources shrank as well. Those include a $234,000 drop in government grants; a $1.9 million decline in program contracts and other project revenue from sources such as governments, businesses, foundations, and individuals; and an $882,793 shortfall in underwriting revenue, according to a separate financial statement. Ellis said automotive and financial firms accounted for much of the underwriting decrease.

In addition, the station saw a $1.3 million loss on its investments.

Sweeney said the board had expected a funding drop, but not "to the degree we saw."

Nonprofit groups nationwide have been hurt in the sour economy, said Ken Berger, president and CEO of Charity Navigator, a group that evaluates charities' finances.

WHYY's filing shows its expenses rising about $600,000, to $29.6 million, at the end of the last fiscal year, including $1.9 million for "compensation of current officers, directors, trustees, and key employees." The year before, that figure was $1.4 million.

Although WHYY laid off 16 full-time staffers in April 2009, near the end of the reporting period, overall spending on programming continued to increase, to $20.4 million, up from $19.7 million.

Three positions were added to the news operation in the fiscal year ended June 30, 2009: a former Inquirer editor, Chris Satullo, as WHYY's executive director of news and civic dialogue; a news editor; and a reporter for the health and science desk.

"It was very important to us to continue executing WHYY's mission," Sweeney said, "knowing full well we were going through a down time in WHYY's economic cycle and [that] we would recover."

WHYY's 2009 cancellation of its Delaware news program, Delaware Tonight, and the opening of an addition to its Independence Mall headquarters last month as part of a $12 million capital-improvement project came after the fiscal year in the most recent documents had ended.

After reviewing the tax document, Craig Firestone, a certified public accountant in Huntingdon Valley who specializes in nonprofit organizations, said WHYY could have liquidity problems if it didn't curtail expenses or increase revenue.

"If things continue like this, you're basically out of existence in three years," said Firestone, board president of Community Accountants, a pro bono service that promotes high financial-management standards for nonprofits.

Sweeney did not share that concern.

The numbers, now "a bit out of date" because of the lag in filing 990s, don't reflect the station's good financial health today, he said.

"We have a balanced budget now and are anticipating a surplus in fiscal year 2010," Sweeney said.

Berger, of Charity Navigator, questioned the station's approach to spending at a time of diminishing revenue. Even if the economy improved, he said, the nonprofit sector has been traditionally among the last to feel a recovery.

"It's a very high-risk strategy," Berger said. "What we've observed is that most charities have taken a hold on some of their more aggressive financial plans."

Sweeney disagreed, saying, "We took appropriate, prudent steps to manage our business plan in the context of a very dislocated economy."

Firestone said another troubling indicator of WHYY's financial condition was its debt load. The tax filing showed total liabilities growing from $11.1 million to $15 million. A particular concern, he said, was the total WHYY owed on accounts payable and accrued expenses, which jumped from $4.5 million to $7 million during the year ended June 30, 2009.

Station officials attributed that increase to the timing of some payments and said all of their bills have been paid.

One expense that declined, according to the tax form, was Marrazzo's pay package. As of June 2009, it was $233,933 less than two years earlier, when he earned $740,090.

Marrazzo referred questions on his pay to Sweeney.

Marrazzo's smaller pay package still was very good by nonprofit measures.

Berger said, "That kind of salary is typically in the highest two-tenths of 1 percent of salary" among all charity chiefs nationwide. Nonprofit CEOs in that bracket tend to lead organizations with budgets of more than $100 million, he said.

Not all public broadcasting stations have completed their tax forms for last fiscal year. Among those that have, Laura Walker, president and CEO of New York Public Radio (WNYC and WQXR) had a pay package of $512,870, about $6,000 higher than Marrazzo's. The organization's revenue was $56.2 million.

The board continues to believe that Marrazzo has been a good steward during rough economic times, Sweeney said.

"The board is indeed quite satisfied with Bill and his management team's performance."